Developmental signals of the Hedgehog (Hh) and Wnt families are transduced across the membrane by Frizzled-class G-protein coupled receptors (GPCRs) composed of both a heptahelical transmembrane domain (TMD) and an extracellular cysteine-rich domain (CRD). How such large extracellular domains of GPCRs regulate signalling by the TMD is unknown. We present crystal structures of the Hh signal transducer and oncoprotein Smoothened (SMO), which contains two distinct ligand-binding sites in its TMD and CRD. The CRD is stacked atop the TMD, separated by an intervening wedge-like linker domain (LD). Structure-guided mutations show that the interface between the CRD, LD and TMD stabilises the inactive state of SMO. Unexpectedly, we find a cholesterol molecule bound to SMO in the CRD-binding site. Mutations predicted to prevent cholesterol binding impair the ability of SMO to transmit native Hh signals. Binding of a clinically used antagonist, vismodegib, to the TMD induces a conformational change that is propagated to the CRD, resulting in loss of cholesterol from the CRD-LD-TMD interface. Our work elucidates the structural mechanism by which the activity of a GPCR is controlled by ligand-regulated interactions between its extracellular and transmembrane domains.

Cholesterol is necessary for the function of many G-protein coupled receptors (GPCRs). We find that cholesterol is not just necessary but also sufficient to activate signaling by the Hedgehog (Hh) pathway, a prominent cell-cell communication system in development. Cholesterol influences Hh signaling by directly activating Smoothened (SMO), an orphan GPCR that transmits the Hh signal across the membrane in all animals. Unlike many GPCRs, which are regulated by cholesterol through their heptahelical transmembrane domains, SMO is activated by cholesterol through its extracellular cysteine-rich domain (CRD). Residues shown to mediate cholesterol binding to the CRD in a recent structural analysis also dictate SMO activation, both in response to cholesterol and to native Hh ligands. Our results show that cholesterol can initiate signaling from the cell surface by engaging the extracellular domain of a GPCR and suggest that SMO activity may be regulated by local changes in cholesterol abundance or accessibility.DOI: http://dx.doi.org/10.7554/eLife.20304.001

Summary Primary cilia are required for Smoothened to transduce vertebrate Hedgehog signals, but how Smoothened accumulates in cilia and is activated is incompletely understood. Here, we identify cilia-associated oxysterols that promote Smoothened accumulation in cilia and activate the Hedgehog pathway. Our data reveal that cilia-associated oxysterols bind to two distinct Smoothened domains to modulate Smoothened accumulation in cilia and tune the intensity of Hedgehog pathway activation. We find that the oxysterol synthase HSD11β2 participates in the production of Smoothened-activating oxysterols and promotes Hedgehog pathway activity. Inhibiting oxysterol biosynthesis impedes oncogenic Hedgehog pathway activation and attenuates the growth of Hedgehog pathway-associated medulloblastoma, suggesting that targeted inhibition of Smoothened activating oxysterol production may be therapeutically useful for patients with Hedgehog-associated cancers.